Today's Oil & Gas Update - Rockrose Energy and Savannah Petroleum

Brent Oil US$64.0/bbl vs US$64.1/bbl yesterday WTI Oil US$58.9/bbl vs US$58.9bbl on yesterday Natural Gas US$2.35/mmbtu vs US$2.32/mmbtu yesterday

RockRose Energy PLC - Today's Oil & Gas Update - Rockrose Energy and Savannah Petroleum

Oil & Gas Daily Flow

Non-Independent Research; Marketing & Sales Commentary - MiFID II exempt information – see disclaimer below

Market Update: Wednesday 11 December 2019

Rockrose Energy (LON:RRE): Seven wells planned by the end of 2020

Savannah Petroleum (LON:SAVP): CPR confirms 2P reserves of 99.6MMboe (gross)


Brent Oil US$64.0/bbl vs US$64.1/bbl yesterday

WTI Oil US$58.9/bbl vs US$58.9bbl on yesterday

Natural Gas US$2.35/mmbtu vs US$2.32/mmbtu yesterday  


Oil Price News

  • Following the strong rally after OPEC+’s production cuts announced last week, oil prices slipped slightly after industry data showed an unexpected build in crude inventory in the US
  • Investors continue to wait for news on whether a fresh round of US tariffs on Chinese goods would take effect from Sunday
  • Brent futures fell by 44 cents, or 0.7%, to $63.90/bbl, whilst WTI slipped by 0.6% to $58.91/bbl, down from a more than two-month high reached on Tuesday
  • US-China trade tensions and the outlook for Fed policy remain the single largest drivers of oil prices in our view

Gas Price News

  • Natural gas prices edged higher on yesterday, but overall sentiment continues to point towards the downside
  • Hedge funds continue to add to short positions in futures and options according to the latest update from Trader’s Report
  • The Department of Energy is scheduled to release its inventory report on Thursday
  • Inventories are expected to decline by approximately 52Bcf this week according to the latest forecast from survey provider Estimize


M&A activity builds momentum across the sector

  • UK oil and gas continues to thrive this quarter, demonstrated by the recent £5m Union Jack* (UJO LN) placing which follows Reabold Resources’ (RBD LN) £24m fundraise announced in October, primarily for the same West Newton conventional field onshore UK
  • Further institutional support has been demonstrated by the £10m raise and IPO of Longboat Energy, or Faroe Petroleum mark II, to build a new full-cycle North Sea E&P
  • The past 12 months has seen the acquisition of Faroe Petroleum (FPM LN) by DNO (DNO ASA); a £380m bid for Eland Oil & Gas (ELA LN) by Seplat Petroleum (SEPL LN); and a £242m bid for Amerisur Resources (AMER LN) by Geopark

 *SP Angel acts as Nominated Advisor and Broker to Union Jack Oil


UK Sector Backdrop

  • Despite a tough capital market environment, UK equities in the Oil & Gas sector remained flat YTD (2018: -16%) wiping out September’s 8% gains
  • AIM Oil & Gas indices were also flat YTD despite some volatility, yet stabilising 2018’s 13% decline
  • These indices have largely tracked the oil price, and with the futures market also remaining steady
  • The small/mid cap constituents of the sector are due to engage in an active year of operational activity in 2020, with a number of high impact drilling catalysts

Company News

Rockrose Energy (LON:RRE): Seven wells planned by the end of 2020

Share price: 1,730p, Market Cap: £224m

  • Rockrose has announced it is preparing to drill the first of two planned infill development wells on West Brae (RRE 40% WI and operator)
  • The wells are designed to access 2P reserves of over 8MMbbl (gross) and to support Brae Complex output by up to 6,000bopd (gross).
  • The first well is expected to come onstream before the end of the first quarter of 2020 while first oil from the second well is anticipated in the second quarter of 2020.
  • A four well drilling campaign is scheduled to commence at the Shell-operated Arran gas/condensate field development in the first quarter of 2020.
  • RockRose has a 30.4% working interest in Arran, which remains on schedule for first gas in early 2021.
  • In addition, the first of two infill wells planned as part of the Blake life extension project will be drilled in the second half of 2020. RockRose has a 30.8% working interest in Blake.

Conclusion: The current drilling campaign marks the start of a significant period of development activity for RockRose, with the company set to participate in at least seven wells before the end of 2020. These will help drive production growth over the next two years and further investment in growth projects is anticipated in 2021 and 2022. Following the much-publicised Marathon deal completed earlier this year, Rockrose is well positioned to use internally generated cash flows to make further acquisitive acquisitions. The shares look good value in our view (currently trading just above unrestricted cash) and with a plethora of North Sea assets on the market, we wouldn’t be surprised to see further high impact acquisitions in 2020 to complement the company’s active drilling programme.


Savannah Petroleum (LON:SAVP): CPR confirms 2P reserves of 99.6MMboe (gross)

Share price: 23p, Market Cap: £207m

  • The company has announced the publication of a CPR covering the Uquo and Stubb Creek fields as well as the Accugas midstream business recently acquired from Seven Energy, along with an operational and trading update covering the Nigerian Assets.
  • The author of the CPR (CGG) confirms 2P reserves of 99.6MMboe (gross) 71.0MMboe (net) respectively, and gross and net 2C resources position of 98.0MMboe and 58.6MMboe.
  • Nigerian Assets gross NPV10, on a maintenance adjusted take-or-pay basis, of US$1.2bn assessed by CGG (NPV10 net to Savannah of US$957m).
  • Net asset-level free cash flow generation, on a maintenance adjusted take-or-pay basis, by the Nigerian Assets assessed by CGG as an average of c.US$130m p.a. (2020 – 2023).
  • Gross 2019 year-to-date production from the Nigerian Assets of 17.3kboepd (+33% year-on-year).
  • 2019 guidance for cash collections from the Nigerian Assets of c. US$190m, leading to a US$40m reduction (2019 vs. 2018) in total third-party debt outstanding at the Nigerian Assets and a forecast YE’19 cash position within the Nigerian Assets of a minimum of US$15m; and
  • Forecast 2020 capital expenditure at the Nigerian Assets of c.US$41.5m.

Conclusion: Today’s update underlines the high quality and robust performance of Savannah’s Nigerian assets in our view. Encouragingly the company has also reported a reduction in production costs at of c.18% over the 2016-19 period. The company continues to make good progress in relation to the supply of gas to potential new customers and is investing in additional well stock to ensure anticipated future production levels are capable of being met. Following the Severn Energy transaction, Savannah is now a full cycle E&P company in West Africa, with the company benefitting from a strong set of exploration, appraisal, development and production assets which are expected to be highly cash flow generative.

Research – Oil & Gas

Sam Wahab - 0203 470 0473

[email protected]


Richard Parlons – 020 3470 0472

Abigail Wayne – 020 3470 0534

Rob Rees – 020 3470 0535  


SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London



+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.


Sources of commodity prices

Oil Brent, WTI


Natural Gas



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